What is Game Theory?

Category: Economics

1Definition

The study of strategic decision-making where each participant's outcome depends on others' choices.

2Context

Used in economics, political science, and biology. Won multiple Nobel Prizes. Explains competition and cooperation.

3Example

The Prisoner's Dilemma shows why two rational people might not cooperate even when it benefits both.

⚠Common Trap

Game theory isn't about games—it's about any strategic interaction, from business negotiations to nuclear deterrence.

More Economics Terms

Get clear definitions without the jargon